By David French
Thursday, December 21, 2017
Earlier this week, my family received a disturbing piece
of junk mail. I’m used to getting simulated checks in the mail, advertisements
for personal loans or potential home-equity loans with eye-popping numbers on
the front. They’ll say, “This is not a check,” but they’re obviously beckoning
you — hoping you’ll submit a loan application so the number becomes real.
This week, however, the envelope was marked “Holiday
Cash,” and the amount on the check was lower. It was only $500. Moreover, it
said “this is a real check.” All I had to do was endorse the back and cash it
at a local bank. There was a catch, of course. I’d be instantly obligated to
repay a short-term, high-interest-rate loan. I’d get cash now, and I’d pay much
more later. But when a family can’t afford to pay for Christmas presents — or
is short on rent — how many will sign that check and worry about the
consequences next year?
I get quite a few of these mailers. My county’s median
income is more than $10,000 below the national median, and when you drive any
distance outside our quaint, picturesque downtown you enter into a world of
store-front payday lenders. Lots of people are hurting. Lots of people have to
borrow money just to make ends meet.
Let’s put the plight of tens of millions of Americans in
concrete context. In a recent Federal Reserve Board survey, 47 percent of
respondents said they couldn’t pay for a $400 emergency without borrowing money
or selling some of their possessions. Other studies have reached similar
results. A majority of Americans — 59 percent — don’t have the resources to
cover a $1,000 emergency. More than half don’t have a total of $1,000 in their
savings and checking accounts combined.
So, given this reality, can an extra $800 or $1,000 per
year make a difference for a working family? That’s roughly the amount of tax
relief coming to millions of American households as a result of the GOP tax
reform.
Not if you asked a segment of left-wing Twitter
yesterday. A festival of mockery broke out over the notion that “only” $18 per
week can make a difference for working families. You can’t go to a decent
restaurant for that amount. You can’t pay for a swimming lesson. Or, the
horror, you might be reduced to dining at McDonald’s on your tax savings.
But what if you saved that money? What if you have that
extra bit of margin that makes life just a little bit less stressful? Writing
in The Atlantic, a self-described
“middle class” writer described what it was like to be one of those Americans
who doesn’t have $400 to spare:
I know what it is like to have to
juggle creditors to make it through a week. I know what it is like to have to
swallow my pride and constantly dun people to pay me so that I can pay others.
I know what it is like to have liens slapped on me and to have my bank account
levied by creditors. I know what it is like to be down to my last $5 —
literally — while I wait for a paycheck to arrive, and I know what it is like
to subsist for days on a diet of eggs. I know what it is like to dread going to
the mailbox, because there will always be new bills to pay but seldom a check
with which to pay them. I know what it is like to have to tell my daughter that
I didn’t know if I would be able to pay for her wedding; it all depended on
whether something good happened. And I know what it is like to have to borrow
money from my adult daughters because my wife and I ran out of heating oil.
Would keeping an additional $1,000 per year change his
life? Doubtful. But mocking the impact of that extra money for the majority of
Americans who live on financial margins that most writers and pundits can’t
comprehend is absurd.
Consider a counterfactual. Would the same people scoffing
at the impact of $18 per week make the same arguments if, say, GOP reforms were
shrinking public benefits by the
amount? Would they say, “Who cares? It’s only one less trip to McDonald’s”? Of
course not. They’d properly see the negative impact of even small-dollar
financial changes.
I believe two things at once. The Republican tax relief
should have helped working families more, but the help it does give is a
meaningful improvement over the status quo. Moreover, the corporate tax-rate
reduction is intended to spur additional economic growth that will lead to
hiring and wage increases that supplement and improve on the direct economic
effects of family tax relief.
In fact (though the announcements were a tad gimmicky),
since yesterday’s bill signing we’ve seen a wave of corporate announcements of
bonuses, pay raises, and capital investments that bring direct benefits to
hundreds of thousands of families — and that’s just the fruit of one day of
policy change.
No one should exaggerate the effects of tax reform — in
either direction. It’s not the bill that cures what ails the struggling
American family. Economic stagnation and economic insecurity are grounded in
political, cultural, and economic factors that are beyond the reach of any
single tax bill or any single legislative reform. But legislation can help or
hurt, and a bill that allows American families who typically don’t have $1,000
to spare to keep $1,000 more of their own money every year is a bill that’s
likely to help, and if a struggling family uses that money wisely, it can even
help a lot.
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